Senate Doc 43 Money Banking History Senate 43.pdf (PDFy mirror)

73d Congress
1" Session

SENATE

DOOJMENT

No. 43

CONTRACTS PAYABLE IN GOLD

AN ARTICLE ENTITLED
'CONTRACTS PAYABLE IN GOLD", BY GEORGE
CYRUS THORPE, SHOWING THE LEGAL
EFFECT OF AGREEMENTS TO
PAY IN GOLD

UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1933

SENATE RESOLUTION NO. 62

Submitted by M r. Shipstead

I N TH E SENATE OF TH E U N ITED STATES,

A pril 17 (calendar day, A pril 24), 1933.

Resolved, That the manuscript entitled "Contracts Payable in
Gold", by George Cyrus Thorpe, showing the legal effect of agree-
ments to pay in gold, be printed as a Senate document.
Attest.

Edwin A. Halsey,

Secretary

II

CONTRACTS PAYABLE IN GOLD

By George C.Thorpe, Washington, D.C.

Holders of commerdal paper and parties to contracts, involving
billion of dollars, stipulating for payment in dollars in gold, or "in
American gold coin" or "in gold coin of the United States of or equal
to the standard of weight and fineness existing" on a certain date, or
"in gold and silver coin, lawful money of the United States", etc., are
interested in the legal import of the qualifying phrases, in the face of
present suspension of gold payments and the possibility of a
depreciated currency.

In a recent English case, Mr. Justice Farwell, in chancery, has held,
under a bond providing for payment of "the sum of 100 pound
sterling in gold coin of the United Kingdom of or equal to the
standard weight and fineness existing" on the date of the bond, there
was an obligation to pay 100 pounds in gold currency, satisfied by
tendering 100 pounds in gold currency, satisfied by tendering 100
pounds in any form that was legal tender in England, (In re Societe
I ntercomunale Beige d 'El ectri cite.)

A similar conclusion was reached in many American cases in State
courts when their jurisdiction first was invoked to give effect to the
effort of businessmen to avoid loss through compulsory acceptance
of a tender of depreciated currency in payment of debts incurred for
a gold consideration, i n the era of the "greenbacks."

The laws of the United States recognize two kinds of money,
namely coin and paper. The term "dollars in specie" means gold or
silver coined dollars. "Dollars in currency" means dollars in notes or
any paper money current in the community. (Trebilcock v. Wilson
(1872) 12 Wall. 687, 20 L. Ed. 460.)

A Missouri contract of June 17, 1862, to pay "in the current gold
coin of the U nited States, in full tale and count, without regard to any
legal tender that may be established or declared by any law of
Congress" was held satisfied by payments in the nominal value in
any legal tender money. The court said that it was not a contract to
be paid in bullion, or in so many pounds or ounces of gold, but in a
certain number of dollars, in coin. The transaction did not regard
gold as a commodity but as money. The Legal Tender Act had made
Treasury notes of like value with gold. As a legal medium there
could be no distinction between notes and gold. The theory of the

suit brought on contracts payable in specific cliattels is tliat tlie
court's judgment Is not for payment In articles in kind, but for the
damages resulting to the creditor in consequences of breach of
contract, and this judgment can be paid off and satisfied in whatever
money the law has clothed with the attributes of legal tender.
Although It was a notorious fact for purposes of trade and In
commercial transactions a difference was made between Treasury
notes and specie coin, whatever fluctuations might arise from
extraneous causes, the debtor's right to pay in whatever medium he
chooses could not be affected. In administering the law. It was
necessary that gold and Treasury notes should be considered equal.
(Appd V. Woltman (1860) 38 Mo. 194.) A note payable "in gold" was
held enforceable only for the face value of the note payable in any
lawful money, and a judgment for a premium on gold In addition
was declared invalid. (H enderson v. M cPlke(1864) 35 Mo. 255.)

A ground rent payable in "lawful silver money of the United States
of America" was satisfied in Pennsylvania by payment of Treasury
notes of the Issue of February 25, 1862, the court saying that the
addition of the word "silver" was merely descriptive of the "lawful
money" and bound neither party, It meant simply a kind of lawful
money in which the tender could be made, not a prohibition of other
forms of money. It was declared that no party could exact, and no
party consent to, a stipulation Impugning the power of the law-
making branch of the Government (Shollenberger v. Brinton (1866) 52
Pa. St. 9.)

In another Pennsylvania case, the defendant promised to pay a
certain number of dollars, "silver money of the United States, each
dollar weighing 17 pennyweights and 6 grains at least." Upon the
plaintiff's demand for a certain amount due in 1863, the defendant
tendered Treasury notes of the Issues of February 25, 1862, and July
11, 1862. The plea of tender "In lawful money of the United States"
was sustained. (M ervlnev. Sailor (1866) 52 Pa. St. 9)

The decision was the same way in another action in Pennsylvania
on a promissory note wherdn there was a proems to pay a certain
number of dollars "In gold, without defalcation", and the plaintiff
demanded gold, or If the defendant had not the gold, that he would
accept United States legal-tender notes, adding the premium on gold,
33 percent. (Laughlln v. H arvey (1866) 52 Pa. St. 9, 30)

In the same State, plaintiffs had deposited gold in the defendants'
bank and received a certificate as follows:

has deposited in this office- dollars, gold, payable

to the order of herself on surrender of this certificate, in like funds,
with interest.

On demand for gold, the defendants offered legal tender notes,
which was held sufficient. (Sanford v. H ays (1866) 52 Pa. St. 9, 26.)

In a Pennsylvania action in assumpsit on a bank's promise to pay
$14,145, the paper bearing on its margin "$14,145 specie", it was

admitted that the consideration was gold and that "specie" meant
payable in coin, gold or silver. A tender of legal tender notes was
held good. (Graham v. M arshall (1866) 52 Pa. St. 9, 28.)

In assumpsitfor money had an received, gold having been pledged
a security, it was held that the damages should not include any
premium on gold, and that, even if the action was in the form of
trover only the value at the time of conversion could be allowed as
damages. (Frothingham v. M orse (1864) 45 N .H . 545.)

In New York, the words "in specie, gold, and silver coin" were held
not to effect the right to discharge an obligation, for the payment of a
certain number of dollars, by paying in legal tender notes. (M urray v.
H arrison (1867) 47 Barb, 484, affirmed (1868) 52 Barb. 427.) So also a
bill of exchange payable "in specieor its equivalent" could be paid in
legal tender notes called "greenbacks." (Jones v. Smith (1867) 48 Barb.
552.)

In an Indiana case, a contract for payment in gold also provided
that if paid in paper the amount thereof necessary to purchase the
gold at the place of payment would be required. In sustaining a
tender in paper money in the nominal amount of the debt the court
said that when Treasury notes were made legal tender in payment of
debts they were made the equivalent of coin as means of payment in
all but the cases excepted by the law. "This, and this only, is meant
by making them legal tender." For that purpose a Treasury note
dollar could accomplish all that a gold coin dollar could accomplish,
for by the law the latter would pay no more than $1 of indebtedness.
The court could not know that its judgment would be paid in paper.
There could be no warrant for a judicial assumption that the
judgment debtor would discharge the judgment by payment in
paper. Gold coin might be used. The court could not know that
paper money would not be withdrawn from circulation before
satisfaction of the judgment. (Brown v. Welch (1866) 116lnd. 117.)

In Texas, a note made payable "in gold" was held dischargeable by
the payment of legal tender notes; judgment on such a note could not
be rendered for specie. (Shaw v. Trunsler (1867) 30 Tex. 390.)

In the same State, the word "specie" in a judgment in an action on
contract providing for payment of $500 in specie, or $894 in United
States currency, was held surplusage that could be struck out on
appeal. (Flournoy v. H ealy (189=69) 31 Tex. 590.)

But the Supreme Judicial Court of Massachusetts was reversed I
entering judgment for an amount in Treasury notes, equal in market
value to the amount of coined gold reserved as rent in a lease
wherein the contract provided for a yearly rent of 4 ounces 2
pennyweights and 12 grains of pure gold in coined money, the
Supreme Court of the United States saying that the contract was for
the payment or delivery of a specified weight of pure gold, solvable
in coined money, and the judgment should have been entered for
coined dollars and parts of dollars, instead of Treasury notes

equivalent in marl<et value to the value in coined money in the
stipulated weight of pure gold. (Dewing v. Sears (1871) 11 Wall. 379,
20 L.Ed. 189.)

Earlier, but after the passage of the Legal Tender Acts, the Supreme
Court had sustained the proposition that express contracts to pay
coined dollars could be satisfied only by the payment of coined
dollars, and that such contracts were not "debts" which could be
satisfied by the tender of Treasury notes. (Bronson v. Rodes (1869) 7
Wall. 229, 19 L.Ed. 141.)

Our highest court said in another case that when it appears to be
the clear intent of a contract that payment or satisfaction shall be
made in gold or silver, damages should be assessed at the sum
entered in coin for that amount. (Butler v. H orwitz (1869) 7 Wall. 258,
19 L.Ed. 149.)

Bronson v. Rodes, supra, became the leading case, followed by later
decisions in State courts. But before that precedent there were
decisions in State courts which enforced the qualifying phrase.

Thus under a contract to return gold, the promissor was held
bound to return the things specified, as he would be bound to return
a specific quantity of any other certain commodity. The court's view
was that "paper promises" having been substituted for a national
money consisting of gold and silver coins, those metals had
disappeared as current money and no longer possessed the functions
of national instruments of exchange, becoming merely articles of
commerce, having the same characteristics and being liable to the
same legal disposition as other articles of commerce when subject
matter of contracts. (Bank of Common wwealth v. Van VIeck (1867) 49
Barb. 508.)

And a stipulation to pay rent "in American gold coin" could not be
discharged by payment in legal tender notes of a nominally equal
amount with the gold promised, unless it should happen that the
notes were at par with American gold in the market. (Myers v.
Kauffman (1868) 37 Ga. 600, 95Amer. Dec. 367.)

A note given in August 1863 providing—

Six months after date, without grace, for value received, I promise to pay

to the order of A the sum of dollars in gold coin of the standard

value of 1860 of the U ni ted States of America, with inters at . And

if said principal and interest is not paid in gold coin, as above stated, then,
for value received, I promise to pay to the order of said A, in addition
thereto, and as damages, such further amount and percentage as may be

equal to the difference in value at market between such gold coin

and paper evidence of i ndebtedness of the States or of the U nited States that
are or may be hereafter made a legal tender in payment of debts by the laws
of this State or of the U nited States —

was construed as manifesting a first intention of the payee to secure a
payment I gold if such payment could be enforced lawfully; and.

secondly, if that could not be done, payment in legal tender notes at
their value (at the place stated in the note) when converted into gold.
(Lanev. Gluckauf (1865) 28Cal. 288, 87Amer. Dec. 121.)

The plaintiffs, depositors in defendants' bank, alleged a banking
custom in the District of Columbia of receiving gold and silver coin
and money currency to be returned in kind, separate entries being
kept as to the classes of money deposited, and balances maintained
as to those classes; in February 1864, having a balance in coin, they
drew checks for coin which the defendants refused to pay in coin;
that coin at that time was worth $1.57 in Treasury notes. Plaintiffs
sought compensation in damages for injuries resulting by the
defendants' refusal to pay the checks. Defendants plead: (1) That
they did not promise as alleged, and (2) that, upon presentation of
the checks, they offered to pay i n Treasury notes made legal tender i n
payment of debts by the act of February 25, 1862.

The trial court excluded testimony offered to prove the alleged
custom as to the difference in receiving and paying deposits in coin
and paper money, and instructed the jury:

If the jury find from the evidence that the defendants were bankers in
1861 and 1862 and that the coin mentioned in the declaration was deposited
with said defendants as banker, to be paid in coin, said deposit created a
debt from the defendants to the plaintiffs which could be discharged by
payment or offer to pay the same in legal tender notes; and if the jury
further find that said tender was made, the plaintiffs are not entitled to
recover."

In affirming judgment of the defendants, the Supreme Court said
that the clear inference from the whole testimony was that the
deposits were made without condition or special agreement of any
kind, and that in such cases the law was well settled that the
depositor parts with title to his money and loans it to the bank, and
the transaction is not affected by the character of the money in which
the deposit is made. The bank becomes liable for the amount of the
debt, which can be discharged by such money payment as is by law a
legal tender. (Thompson v. Riggs (1867), 5 Wall. 663, 18 L.Ed. 704.)

However, the court also said that contracts between a banker and
his customers doubtless are required to be performed, and must be
construed in the same way as contracts between other parties.

When the banker specifically agrees to pay in bullion or in coin he must
do so or answer in damages for its value; and so if one agrees to pay in
depreciated paper the tender of that paper is a good tender, and in default
of payment the promisee can recover only its market value and not its
nominal value. (Same case.)

All of these American decisions were rendered long before the
enactment of the Parity Act of 1900, providing that -

The dollar, consisting of 25.8 grains of gold nine-tenths fine shall be the
standard unit of valuer and all forms of mon^ issued or coined by the
United States shall be nnaintained at a parity of value with this standard,
and it shall be the duty of the Secretary of the Treasury to nnaintain such
parity.

This has not been repealed. Other existing statutes provide:

(a) The gold coins of the United States shall be legal tender in all
paynnents at their nonninal value when not below the standard
weight and limit of tolerance provided by law for the single piece,
and, when reduced in weight below such standard and tolerance,
shall be legal tender at valuation in proportion to their actual
weight. (R.S., sec. 3585)

(b) Silver dollars coined under the act of February 28, 1878, together
with all silver dollars coined by the United States of like weight
and fineness prior to the date of such act shall be a legal tender, at
their nominal value, for all debts and dues, public and private,
except where otherwise ©<pressly stipulated in the contract. But
nothing in this section shall be construed to authorize the payment
in silver of certificates of deposit issued by the Secretary of the
Treasury for deposits of gold bullion. (Act Feb. 28, 1878, c. 20, sec.
1,20 Stat. 25.)

(c) The silver coins of the United States in ©<istencejune 9, 1879, of
smaller denominations than $1 shall be a legal tender in all sums
not exceeding $10 in full payment of all dues, public and private.
(Act June 9, 1879, c. 12, sec. 3, 21 Stat. 8.)

(d) The minor coins of the United States shall be a legal tender, at
their nominal value, for any anrxjunt not exceeding 25 cents in any
one payment (R.S. sec 3587.)

(e) Various commemorative silver and gold coins (50-cent piece, gold
dollar and gold $2.50 pieces), coined at the mints of the United
States under authority of law, area legal tender in any payment to
the amount of their face value. (Various statutes compiled in
section 461 of title 31 of the U .S. Code)

(f) Gold certificates of the U nited States payable to bearer on demand
shall be legal tender in payment of all debts and dues, public and
private. (Act Dec. 24, 1919, c. 15, sec. 1, 41 Stat. 370.)

(g) United States notes shall be lawful money, and a legal tender in
payment of all debts, public and private, within the United States,
except for duties on imports and interest on the public debt. (R.S.
sec. 3588, derived from statutes passed in 1862 and 1863.)

(h) Demand Treasury notes authorized by the act of July 17, 1861,
chapter 5, and the act of February 12, 1862, chapter 20, shal I be
lawful mon^ and a legal tender in like manner as United States
notes. (R.S. sec 3589, derived fro acts of 1861 and 1862.)

(i) Treasury notes issued under the act of July 14, 1890, chapter 708,
shall be a legal tender payment of all debts, public and private,
except where otherwise expressly stipulated in the contract. (Act
July 14, 1890, c. 708, sec. 2, 26 Stat. 289.)

(j) Treasury notes issued under the authority of the acts of IMarch 3,
1863, chapter 73, and June 30, 1864, chapter 172, shall be a legal
tender to the same ©<tent as United States notes, for their face
value, ©(eluding interest: Provided, That Treasury notes issued
under the act last named shall not be a legal tender in payment or
redemption of any notes issued by any bank, banking association,
or banker, calculated and intended to circulate as money. (R.S.
3590, derived from acts or the dates stated in this section.)

Is there anything in the legislation subsequent to the decision in
Bronson v. Rodes, supra,

which would require a different decision as to the legal import of
such phrases as"dollarspayablein gold coin", etc.?

In forming its opinion on the meaning of that phrase, the court
found it "necessary to look into the statutes regulating coinage."
After reviewing such statutes as it deemed pertinent to the inquiry
concerning the import of the quoted phrase, it concluded that the
contract for payment in gold should be enforced. The assertions in
the court's opinion that: (a) Gold and silver coins are legal tender in
all payments; (b) there are two descriptions of money in use,
authorized by law, and both made legal tender in payments; and (c)
the statute denomination of both descriptions is dollars, but they are
essentially unlike in nature, the coined dollar being a piece of gold or
silver of a prescribed degree of purity and weighing a prescribed
number of grains, and the note dollar bang a promise to pay a
coined dollar though not a promise to pay on demand or at any fixed
time, present time, within the letter of the above-quoted statutes
relating to legal tender, without regard to the parity act.

Does the parity act, quoted above, make specie and currency
equivalent if in fact one or the other should become depreciated in
actual market value?

The court said, that case, that it was "impossible, in the nature of
things, that these two dollars should be actual equivalents of each
other", and that there was nothing in the Currency Acts "purporting
to make them such." How far they were from being actual
equivalents had been stated earlier in the opinion, i.e., $1 in coin
equivalent to $2.25 in United States notes.

Under similar circumstances in the future the court still could say,
"It is impossible, in the nature of things, that these two dollars
should be actual equivalents of each other"; but could it say that
there is nothing in the currency laws "purporting to make them
such", in view of the parity act?

The parity act does not declare that all forms of money issued or
coined by the United States are at parity of value with the standard
gold dollar, for that would be declaring to be a fact that which is not,
or may not be, the fact, or cannot be the permanent fact. Value is
purchasing power and that in turn implies varying degrees of

willingness of holders of consumable commodities to exchange them
for money. If both coin and currency are in circulation, the holder of
a commodity desired by different groups of persons, one group
possessing specie and the other group currency, will surrender in
exchange for money a larger quantity or a better quality of the
commodity for, say, specie, than for currency, of equal nominal
amounts. No law declaring parity can achieve actual equal
acceptability, or purchasing power. And so the parity act, in
declaring that "all forms of money issued or coined by the United
States shall be maintained at a parity of value with" the standard
gold dollar, might be construed as the declaration of a policy or a
mission, and the concluding clause, "it shall be the duty of the
Secretary of the Treasury to maintain such parity", as the definition
of a duty.

When gold is unobtainable and currency in circulation, can it be
said that specie and currency are at a parity? When both specie and
currency are in circulation in such proportions that the citizens much
prefer specie and actually will pay a premium therefore, can it be
said that these two kinds of money are at parity of value with the
standard gold dollar? If the Parity Act can be said to purport to
make the two kinds of money actual equivalents of each other, but if
as an actuality the two kinds of dollars are not, or may not be,
equivalents, will the Supreme Court's judgment be the same, as
before the passage of the Parity Act, if called upon to construe the
legal import of promises to pay in specie? May it not again refuse to
"suppose that it was intended by the provisions of the Currency
Acts" and the Parity Act of 1900, "to enforce satisfaction" of contract
to pay in coin "by the tender of depreciated currency of any
description equivalent only in nominal amount to the real value of
the bullion or of the coined dollars", as in Bronson v. Rodes, supra?

Or shall we hear that the Parity Act is the declaration of something
which must be accepted as fact, even though that be contrary to the
operation of economic laws?

The power to issue currency is not specifically given in the
Constitution, the express authority to "emit bills" originally in the
"Resolutions" before the Constitutional Convention having been
stricken out on motion after considerable debate. Daniel Webster
said in the Senate in 1836 that although no express prohibition from
making anything but gold and silver a tender in the payment of
debts is applied to Congress, yet as Congress has no power granted
to it in that respect but to coin money and regulate its value and that
of foreign coin, it clearly has no power to substitute paper or
anything else for coin as a tender in payment of debts and discharge
of contracts. (Webster's Works, vol. 4, p. 271.) For the first 70 years
of this Government's existence there was no national currency, all
transactions of the Government having been in gold and silver coin.
Paper currency used in private transactions consisted almost entirely

of bank notes issued by nunnerous independent corporations
variously organized under State legislation, of various degrees of
credit and very unequal resources, administered often with great and
not infrequently with little skill, prudence, and integrity. National
laws prohibiting the recdpt or disbursement of anything except gold
and silver in the transactions of the Government and State laws
requiring the exemption of bank notes in coin on demand prevented
the disappearance of gold and silver from circulation. (See Veazie
Bank v. Fenno (1869) 8 Wall. 533, 19 L.Ed. 482.) As a matter of
history, paper money in the shape of bills of credit was issued by the
Colony of Massachusetts about 1690 to pay the Army returning
unexpectedly from a disastrous expedition against Canada. All the
Colonies, at various times, followed this example. Sometimes these
bills were made a legal tender in the payment of all debts. Some bills
were receivable i n al I payments of taxes and d ues to the Government.
Some were nominally payable in specie. Generally a certain fund
was pledged for their redemption. But some were issued on the mere
credit of the issuing Government.

Although the power to issue currency was not expressly given to
Congress by the Constitution, Congress has found the power implied
and has called it into full activity since 1861 in undertaking to supply
a national currency for the entire country. It has made currency
receivable in payment of debts to itself; has provided for its
redemption and its uniformity in description and value. (See Veazie
Bank v. Fenno, supra.) To the enumeration of the powers of Congress
is added that of making all laws which shall be necessary and proper
for carrying the enumerated powers into execution, and all other
powers vested by the Constitution in the Government of the United
States, or in any department or officer thereof. (United States
Constitution, art. 1, sec. 8, cl. 18.) The "sound construction of the
Constitution must allow to the National Legislature that discretion,
with respect to the means by which the powers it confers are to be
carried into execution, which will enable that body to perform the
high duties assigned to it in a manner most beneficial to the people.
Let the end be legitimate, let it be within the scope of the
Constitution, and all means which are appropriate, which are plainly
adapted to that enc, which are not prohibited, but consist with the
letter and spirit of the Constitution, are constitutional." (M 'Culloch v.
State of M aryland (1819) 4 Wheat. 316, 4 L.Ed. 579.)

So Congress has the implied power to issue currency and to
provide for uniformity in description and value of its currency, as
well as the express power to coin money and regulate the value
thereof; but do those powers include the power to make the coined
money, the value of which it can regulate, the exact equivalent of its
currency, for the uniformity in description and value of which it can
"provide"? Is this third power implied as "necessary" within the
doctrine of M 'Culloch v. M aryland?

The regulation of the value of coined money consists in fixing the
classes of coins that shall be issued and a standard of measurement
of specie. Similarly, it is possibleto classify bills or notes issued or to
be issued and to declare the Government's promises as to their
redemption and their receivability by itself in governmental
transactions or in the payment of debts. For some 70 years of the
Government's existence Congress acted under only one of these
powers— that of coining money and regulating its value. Then it
acted upon the other power— that relating to currency. The exercise
of these different powers resulted in two kinds of national "money":
(SeeBronson v. R odes, supra). But they did not produce two kinds of
money of equal value— equal acceptability, equal purchasing power.
Between 1862 and 1866 the premium on gold rose and fell from 30 to
160 percent. (See Shollenberger v. Brinton (1866), 52 Pa. St. 9, 33.) If
"money" is the medium for effecting exchanges and is a measure of
value, when the law made both species and currency legal tender,
without actual equal purchasing power, gold became a mere
commodity or article of commerce (see Bank of Commonwealth v. Van
VIeck, supra.) since it had inherent value as a metal, while currency
had no inherent value, only conceptional value as ideal money. But a
uniform medium of exchange is essential to the commerce and
prosperity of every civilized and commercial people. Money as such
is of value, or is in demand, not because it is more valuable than the
quantity of property it will purchase, but because it readily can be
exchanged for any article. (See Brown v. Welch, supra). The existence
of two kinds of money, lacking uniformity of exchangeability,
created an impossible situation, or, at least, a situation which tended
to nullify the purpose of the legal tender laws. Obviously, some law
was necessary to integrate the currency and legal tender laws.

The enumerated power from which the power to pass such a law as
the parity act may bethought to be implied is, of course, the power
to coin money and regulate its value. The end sought to be
accomplished is to maintain as "money" that which Congress
expressly is empowered to coin, for that power is to "coin money"
and not merely to stamp coins. The parity act became necessary in
order to maintain the circulation of specie as money and in order
effectively to regulate the value of coined money. The end sought to
be accomplished by the parity act, therefore, is legitimate and within
the scope of the Constitution. The parity act is an appropriate means
plainly adapted to the end in view, i.e., to standardize money for use
as a national medium of exchange. It is only by virtue of law that
paper notes are money or legal tender; and it is only by virtue of law
that either coin or paper has a declared value; and only by virtue of
law can coin and paper be maintained at a parity in order to afford a
proper medium of exchange. A parity law therefore is a necessary
complement to the currency laws.

The ultimate ownership of all property is in the State; individual
so-called "ownership" is only by virtue of Government, i.e. law,
amounting to mere user; and use must be in accordance with law,
and subordi nate to the necessiti es of the State. The fact that citizens,
at a given time, may prefer specie to currency, or vice versa, can not
prevent Congress from enacting those laws which it deems necessary
to the maintenance of a proper monetary system. If the law makes
specie and currency equivalent for purposes of payment, a failure to
pay a given sum in specie, according to contract, cannot possibly
beget an obligation to pay a greater sum in legal-tender notes,
whatever premium men may choose to five for gold, when forced to
obtain it for a specific purpose, or when impelled by a spirit of
speculation, or by a distrust of Government. (Brown v. Welch, supra.)

While the courts cannot control our citizens' preferences for one
kind of money over another kind, or prevent them from giving a
premium for the one or the other kind of money, when the fiscal
affai rs of the Government necessitate the adopti on of a certai n pol i cy,
expressed in constitutional legislative enactment, such as the
maintenance of a monetary system consisting of specie and currency,
to be acceptable interchangeably as to the value of the dollar, the
courts should not give effect to a stipulation impugning the power of
the legislature to makesuch laws, and should not apply those laws to
the construction of contracts i n such away as to defeat the legitimate
purpose of those laws, upon the enforcement of which the very
existence of the Government may depend, or, at least, the aggregate
well-beingofthewholepeopleis contempi ated .

As it is not strictly correct to say that a contract is "invalid" merely
because the courts will not enforce it, since enforcement may be
withheld from valid promises because some provision of law
prohibits enforcement, such, for example, as the statute of
limitations, or the want of a legal consideration, valid contracts may
be made and carried out between parties, without regard to legal
limitations, so long as the jurisdiction of courts is not invoked to
enforce the agreement. But when judicial enforcement is sought, the
courts must find all pertinent constitutional laws tacitly written into
every contract they construe.

So a contract to pay dollars tacitly includes the laws of the United
States defining "dollar" and regulating the value thereof and
prescribing its usability as money. And a contract to pay dollars "in
gold" or in any other form of money of the United States, tacitly
incorporates into that contract the parity act declaring all forms of
money issued or to be issued by the U nited States at a parity. H ence,
the courts, in construing such a contract, must read into that contract
the parity act, and if the promisee brings an action on the contract,
the defendant's plea that he has tendered in payment any money that
is lawful tender under the laws of the United States, is good, since all

forms of money are at a parity and the defendant's plea, in effect, is
that he has tendered theequlvalent of the thing promised.

Furthermore, although in Bronson v. Rodes, supra, the Supreme
Court said that "when contracts made payable in coin are sued upon,
judgments may be entered in coin dollars and parts of dollars", it is
doubtful if it could so rule now, in view of the necessity of reading
into the contract the parity act, for the court would be bound to
recognize that dollars coined or issued by the United States are at a
parity, from which it follows that judgments in all such cases must be
for dollars, or for dollars and parts of dollars, without qualification as
to coin or paper. If the promise to pay so many dollars in gold be
restated as two promises, one to pay dollars and the other to pay in
gold coin, the courts must read into those two promises the existing
pertinent laws at the time of the demand, and give judgment on the
promise to pay dollars (which may be satisfied by payment or tender
in any lawful money that is legal tender), and give no effect to the
promise to pay in gold coin since under the laws the second promise
adds nothing to thefirst promise.

In other words, the contract creates an obligation to pay dollars in
gold, satisfied by tendering the stated number of dollars in any form
that is legal tender of the U nited States.